Walgreen 4Q profit falls 55% after Express Scripts spat

September 28, 2012|By Peter Frost | Tribune staff reporter

A customer drives away from the Walgreens in Westminster, Colo. (Rick Wilking/Reuters)

Walgreen Co. said Friday that its fourth-quarter profit dropped 55 percent to $353 million, or 39 cents per diluted share, as the lasting effects of its nine month separation from Express Scripts Inc. and its big purchase of European drug store operator Alliance Boots GmbH weighed on results.

Adjusted for certain one-time factors, including charges related to the Alliance Boots transaction, the Deerfield-based pharmacy chain said earnings were $553 million, or 63 cents per diluted share, down from $599 million, or 66 cents, in the fourth quarter of 2011.

Total sales fell 5 percent to $17.1 billion. Same-store sales, a closely watched retail metric, fell 8.7 percent, largely a result of its costly but temporary divorce from Express Scripts.

Walgreen closed out its 2012 fiscal year with a thud. Net income for the year was down nearly 22 percent to $2.13 billion on full-year sales of $71.6 billion, down 0.8 percent from 2011.

The drug-store chain parted ways with Express Scripts on Jan. 1 over a pricing dispute, dropping out of network for millions of former customers who fled Walgreens stores for competitors like CVS/Pharmacy and Rite Aid. The two sides eventually made up, with Walgreen again joining the network on Sept. 15.

But the damage was done. Walgreen said the spat hurt earnings 6 cents a share in the fourth quarter and 21 cents for the fiscal year.

"This was a challenging, but very important year for Walgreens, and we finished with a tough quarter," said Walgreen President and Chief Executive Greg Wasson. "While we controlled costs and generated strong cash flow in the fourth quarter, our performance also reflected a strategic shift in promotional spending, a continued economically challenged consumer, and the impact from Express Scripts."